Testing the Sustainability of Current Accounts for Major South Asian Economies: A Panel Data Approach Shruti Shastri 1 A. K. Giri 2 Geetilaxmi Mohapatra 3 Abstract The study assesses the sustainability of current accounts for the panel of five major South Asian economies, namely, India, Pakistan, Bangladesh, Sri Lanka and Nepal for the period 1985–2016. Towards this end, the intertemporal solvency model of Hakkio and Rush (1991) and Husted (1992) has been employed. The panel co-integration test by Westerlund (2007) confirms the long-run relation- ship between exports and imports but the estimates of the slope coefficient based on GM-FMOLS, GM-DOLS and CCEMG turn out to be less than one indicating the weak sustainability. The weak form of sustainability implies that current account inflows are not equally matched by the outflows underscoring the need for policy interventions. An analysis of the other fundamentals, how- ever, reveals that the non-consumption-dominated import structure, increasing export diversification and broadly declining external debt stocks are welcome signs for the external sustainability of the region. JEL: F30, F32 Keywords Sustainability of current account deficits, South Asia, panel co-integration, group mean FMOLS, group mean DOLS Research Article Corresponding author: Shruti Shastri, Department of Economics, Banasthali Vidyapith, Rajasthan, India. E-mail: shastrishruti5@gmail.com 1 Assistant Professor, Department of Economics, Banasthali Vidyapith, Rajasthan, India. 2 Associate Professor, Department of Economics, Central University of Rajasthan, Rajasthan, India. 3 Assistant Professor, Department of Economics and Finance, Birla Institute of Technology and Science (BITS), Rajasthan, India. South Asia Economic Journal 19(1) 1–21 © 2018 Research and Information System for Developing Countries & Institute of Policy Studies of Sri Lanka SAGE Publications sagepub.in/home.nav DOI: 10.1177/1391561418761064 http://journals.sagepub.com/home/sae